NewMarket Q2 2023 Earnings Call Transcript

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Provided by Quartr
July 27, 2023

There are 2 speakers on the call.

Operator

Good day, everyone, and welcome to the Newmarket Corporation Conference Call and Webcast to review Second Quarter 2023 Financial Results. At this time, all participants have been placed on a listen only mode. It is now my pleasure to turn the floor over to your host, Bill Skroback. Sir, the floor is yours.

Speaker 1

Thank you, Matthew, and thanks to everyone for joining me this afternoon. As a reminder, some of the statements during this conference call may be forward looking. Relevant factors that could cause actual results to differ materially from those forward looking statements are contained in our earnings release and in our SEC filings, including our most recent Form 10 ks. During this call, I will also discuss the non GAAP financial measures included in our earnings release. The earnings release, which can be found on our website, We filed our 10 Q this morning.

Speaker 1

It contains significantly more details on the operations and performance of our company. Please take time to review it. I will be referring to the data that was included in last night's earnings release. Net income for the Q2 of 2023 was $100,000,000 or $10.36 a share compared to net income of $66,000,000 or $6.54 a share for the same period in 2022. Petroleum Additives net sales were $684,000,000 compared to $721,000,000 for the Q2 of last year.

Speaker 1

Petroleum Additives operating profit for the quarter was $132,000,000 compared to $91,000,000 for the Q2 of 2022. The profit increase was mainly due to increased selling prices, partially offset by lower shipments and higher operating costs. Shipments between quarterly periods were 17% excuse me, down 17% with decreases in both lubricant additives and fuel additive shipments. All regions contributed to the decrease in lubricant additive shipments, While North America was the primary contributor to the decrease in fuel additive shipments, shipments did increase slightly in the 2nd quarter compared to the Q1. Shipments have been lower than our expectations over the last three quarters As we continue to see the effects of a general economic slowdown and customer destocking, supply disruptions and rapid oil price movements as well as customer expectations about future pricing can all contribute to destocking and restocking.

Speaker 1

While we have seen Wide variation in customer order patterns and demand over the past few years, the end use of our products does not change significantly. Petroleum additives operating margin for the rolling 4 quarters ended June 30th was 16.8 percent, which is back within our historical range and reflects the benefits of our focus on cost control and margin recovery. However, we are still challenged by higher operating costs due to the ongoing inflationary environment. Cost control and margin management remain high priorities for us. We generated solid cash flows during the quarter And continue to operate with low leverage.

Speaker 1

Our working capital improved by $43,000,000 We paid dividends of $22,000,000 which included a 7% increase to our quarterly dividend rate and we repurchased $14,000,000 of our common stock. Our net debt to EBITDA was 1.4 times as of June 30, 2023, A significant improvement over the 2 times we reported at the end of 2022. For 2023, we expect to see a capital expenditures in the $50,000,000 to $60,000,000 range. This is slightly Lower than our previous range due to the operational timing of some of our projects. We remain focused on the long term success of The company including emphasis on satisfying customer needs, generating solid operating results and promoting the greatest long term value for our shareholders, customers and employees.

Speaker 1

We believe the fundamentals of how we run our business, Our long term view, safety and people first culture, customer focused solutions, technology driven product offerings And a world class supply chain capability will continue to be beneficial for all our stakeholders. Thank you for joining me for the call today. Matthew, that concludes our planned comments. We are available for questions via email or by phone. So please feel free to contact me directly.

Speaker 1

Thank you all again, and we will talk to you next quarter.

Operator

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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Key Takeaways

  • Net income rose to $100 million ($10.36/share) in Q2 2023 from $66 million ($6.54/share) a year ago, driven by improved margins and higher selling prices.
  • Petroleum Additives net sales declined to $684 million from $721 million, but operating profit jumped to $132 million from $91 million despite lower shipments and inflationary cost pressures.
  • Shipments fell 17% year-over-year amid customer destocking, economic slowdown, supply disruptions and oil price volatility, though the rolling four-quarter operating margin recovered to 16.8%.
  • Strong cash flow enabled a $43 million improvement in working capital, a 7% dividend increase, $14 million in share repurchases and a net debt/EBITDA ratio of 1.4× as of June 30, 2023.
  • 2023 capital expenditures are expected to be $50–60 million, with continued emphasis on cost control, margin management, customer solutions and technology-driven growth.
A.I. generated. May contain errors.
Earnings Conference Call
NewMarket Q2 2023
00:00 / 00:00